VA insurers not feeling the love from RIAs

Fee-laden variable annuities appear to be making some inroads among RIAs, but the independent broker/dealer channel is still where more selling is expected to go on, according to survey data released this week by the Insured Retirement Institute and Cerulli Associates. Nearly 64 percent of insurers polled last quarter projected that sales of the product among IBDs would increase by 10 percent or more in 2013, compared with 41.7 percent of insurers who saw those sales level increases in the RIA space. Half the insurers expect sales among RIAs would remain the same for 2013, compared to 36.4 percent of insurers who expect the same in the IBD space.

Insurers see advisor participation in variable annuities as key to long-term growth in their industry; just a small segment of advisors account for most VA sales, the survey said. But it doesn’t look as if sentiment is growing to restructure the products in some way that would make them more palatable or convenient to RIAs. Just 7 percent of insurers described “Repricing products to fit on a fee platform” as the most promising strategy for broadening the number of advisors peddling VAs. In comparison, 47 percent thought “Better training on retirement income” was a better solution.

Annuities can be tough products for advisors to sell—lots of moving parts, complexity, and the risk that an insurer can collapse and leave the investor clients hanging. Of course, steep commissions can make it attractive to advisors, but that doesn’t work for many RIAs who would see conflict with their fiduciary responsibility.